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The historic tax agreement passed by Congress this week raises rates on top earners from 35 percent to 39.6 percent. Meanwhile, provisions from the 2010 health care law kicked in Jan. 1, increasing rates on investment income from 15 percent to almost 24 percent for the most affluent taxpayers.

Winning these levies was hard enough. With Republicans licking their wounds in the wake of the fiscal cliff deal, Democrats know that politically speaking, there’s virtually no way to keep increasing marginal tax rates.

“This does settle the issue of rates for individuals,” Rep. Allyson Schwartz (D-Pa.) told POLITICO. “That’s good. That certainty and predictability is one of the gains” of the fiscal cliff legislation.

Michigan Rep. Sander Levin, the top Democrat on the tax-writing Ways and Means Committee, agreed. When asked whether more rate increases are in the offing, he responded, “I don’t foresee that.”

It’s a significant policy evolution for a party that has been screaming about raising rates on top earners ever since President George W. Bush started slashing taxes in 2001.

But the new tone from Democrats doesn’t mean the brutal tax fights of the past few years are about to die down. With the focus in Washington already shifting to looming debates over raising the debt ceiling, replacing the so-called sequester and keeping the government funded past March, Democrats say other types of tax revenue will still be a key element of future budget negotiations.

“The push continues for balance and fairness,” said Rep. John Larson (D-Conn.).

The fiscal cliff deal established an important precedent for negotiations, according to Maryland Rep. Chris Van Hollen, the top Democrat on the Budget Committee. The legislation, he noted, delays the so-called sequester for two months and pays for the postponement by both raising revenue and cutting spending.

And though President Barack Obama’s speech on New Year’s Eve on the fiscal cliff deal was mocked roundly as a pep rally for tax increases, Van Hollen said it was an important event because the president highlighted that principle and said it must be honored going forward.

“The thing at the White House? Yeah, it was part rally,” Van Hollen told POLITICO. “But the important part of it was laying down and establishing the … principle that we still need to take a balanced approach going forward — meaning we’ve got to make some cuts going forward, but we also need additional revenue.”

Readers' Comments (10)

Republicans may think that tax issues have been settled with passage of the extension of tax breaks for 98% of tax payers. But the truth is that revenues will be flowing into the government coffers coming from the looming closings of loopholes in the TAX code. Those closings of loopholes will result in the wealthiest in our country paying more taxes. This means that the Democrats and Obama are still very much in control of negotiations.

Obsessive focus on income tax rates is distracting. A financial transaction tax applied to Wall Street gamblers could do more to balance the budget than all the tinkering with marginal rates at 35% versus 39%.

And for those who claim to be worried about Social Security's solvency, simply raisng the cap on contributions to include earnings above $110K would solve that problem in a hurry.

But it's probably true that Democrats don't have the willpower to accomplish anything much -- nor do they have the political need to do so as long as the Republicans continue imploding all on their own.

This was only phase one. Phase two is to eliminate tax loopholes and capping deductions and closing off shore tax havens. Balance by spending cuts, such as reducing Military spending by one third, reducing or eliminating programs that only benefit the few. Ending corporate welfare, and having the IRS go after large tax cheats.

In order to remove social security from assault in the next round of negotiations, perhaps President Obama's next move should be to lower the payroll tax permanently to 4.2 percent or less. This would require expanding the base from this year's projected $113,000-plus to at least double that, or whatever it takes to make social security solvent for as far as the eye can see.

His administration might even consider an earlier retirement age than 62, with appropriate penalty, to give aging, health-challenged folks some relief. This would have the added benefit of freeing up jobs for a younger generation.

If we have the highest taxes in the world, businesses will go elsewhere! We have a global economy now. Businesses are starting to move already with the new tax increases and the high corporate taxes. You can't tax your way out of a spending fiasco!!! Also, we almost 49% in this country that pay NO taxes at all. Time for them to get in the game to.

The Democrats NEVER wanted to "PUNISH" the wealthy..they just wanted them to pay a fairer share of the US tax burden which they now are. This article is guilty of what's wrong with Politics today, a zero sum type of Politic where there has to be a winner and there has to be a loser. As soon as US Politicians start acting like colleagues again instead of ****ed off schoolboys we might become a great nation again. As it currently stands we are a third World Bully with self destructive tendencies. Grow UP!